rjs
Level 15
Level 15

Retirement tax questions


@DD660 wrote:

So, long term is 12 months of greater?


Not exactly. One year or less is short-term. Long-term is more than one year.

 

 


@DD660 wrote:

Any idea of the rate difference for long versus short? 


It's complicated. There is a separate bracket structure for long-term capital gains, different from the regular income tax brackets. The attached PDF shows the 2024 brackets for qualified dividends and long-term capital gains. Note that the brackets are based on total taxable income, including the capital gains and all other taxable income. Taxable income is basically Adjusted Gross Income (AGI) minus either the standard deduction or itemized deductions and the QBI deduction. For determining the tax rate, the long-term capital gains are "stacked" on top of your taxable ordinary income. So for example, using the 2024 rates for married filing jointly, suppose you have $90,000 of ordinary taxable income and $10,000 of taxable long-term capital gain. The first $4,050 of the capital gain will fall in the 0% bracket. The remainder will be taxed at 15% (up to a total of $583,750 of taxable income).


If you live in a state that has state income tax, you might also want to consider the state tax. Most states do not have lower rates for long-term capital gains like the federal tax does. All types of income are taxed at the same rates. Some states may also treat IRA distributions and other retirement income differently from other income.

 

This answer is based on the current tax law for 2024. Some of the relevant provisions will expire after 2025. So the situation could change beginning in 2026, depending on what, if anything, the new Congress does about the expiring provisions.